Tuesday, December 30, 2014

"You can be what you want to be. Think hard, work hard, the potential will be unlocked in your future life"

The crowd start talking among themselves

"I want to be rich" ...

"I want to be healthy!"...

"I want intelligence..."

"I want wisdom and charm..."

"I want happiness..."

After a while, the crowd quiets down...

A voice asked:" if I want 'everything', is it impossible?"

The teacher said:" nothing is impossible, work hard. Although it is easier to focus...

Remember, you need to find the people that emulate what you want and observe them. Once you find them, find the shape of the soul, find the common shape, and I can help shape you at close as possible. The more similarities you find ,the more accurate it is. If you want more strands of goodness, you will to decipher the shape.

The crowd went silent. "Learning by observing and analysising is never easy, it is up to you, what reap what you sow. When u are ready, come to me, and then you are ready for your next life, remember , you have all the time in the world, you can work together, share information, it will be easier to decipher what shape is for intelligence, what is for health, etc"

Soon, the crowd dispersed, eager to find the souls of living people and study them. Many famous names were thrown around, many of different nationalities to be case studies.

The teacher sighed. It then noticed a lone soul. It said:" do you have no idea where to start?"

The soul said in a very soft voice:" can I have..."

The teacher said:" sure, draw me the shape"

The soul hesitate:" but I want ...I want nothing"

"Why are you so lazy!!" The teacher yelled.

"I will live my next life as it is, seizing every day, I do not want to cling to anything, since nothing is for sure anyway, uncertainty is scary but also beautiful, I want it that way."

Tuesday, December 23, 2014

Although everyone believe I do not exists, with people thinking I am a commercial gimmick for higher sales, you know existence does not equate to being real.

You have been wondering about the spirit of Christmas, and is counting your blessings. You also wonder if the reindeers are actually too fat to fly anymore. Thank you for your concern, they are fine, just that no one puts up Christmas socks for me to leave a gift anymore, and even if they do, the homes are all of tight security now, CCTV, police alarm. Not that I do not have a way of disarming these, but I just no longer feel welcome.

I started giving, hoping that people will understand the joy of giving.

Alas, my intention while pure, is misconstrued as a commercial gimmick nowsaday. Also, it is never my intention for anyone to feel stress over what gifts to buy. Giving does not have to be restricted to real presents, just like existence does not mean it's real.

You have ask yourself, what have you give this year. You start to think in the line of charity, the amount you have given and the beneficiaries that you would have helped. That is wonderful.

I am glad you move on further to ask if you have gave love to those around you, gave time to those who need it, and gave your best in whatever you do.

It is clear, you find something missing, and nope, that cannot be given. It is with you, you are holding it without realizing it.

The convention wisdom is used a range of valuation metrics for the right category of investment.

What do I mean?

If u doing asset play, most probably u need to break down all the balance sheet, look at intangibles etc, look at reproduction cost ( see B's blog post)

If u want stable yield, then FCF, DCF, DDM, etc

So what is my point?

I think it is important to have a story backed by numbers and not a story of numbers.

Why? Because numbers are highly dynamic, fluid. It is the story ( moat analysis, business anaylsis that is more stable)

Is a business a lousy business just because it has a few quarters of poor results? Is the business doom to ridiculous valuation just because the industry outlook is bleak?

Be careful of extrapolation pitfall. When a company is doing well, analysts like to extrapolate that it will continue to grow, just read aerospace analysis just 6 months ago. Similarly, when a sector is not doing well, analysis like to extrapolate the downward trend too.

Not that it is wrong to know a industry outlook, but it is of vital

Important to realised that good news is negatively correlated with valuation. Vice versa.

A company, or a good one, with moat, do not disappear because it is facing business challenges.

Yes, profits might plunge and if u are purely looking at numbers, you will think hey, the valuation is not that fantastic.

But, when the news is good and the profit soaring, the valuation will be not fantastic too. The only time to get fantastic valuation is during severe bear, like the AFC or GFC, but by then, u need not valuation method. Like uncle temperament said: put up a dart board with solid blue chips ( strong balance sheet and still eking profits) , close your eyes and throw your darts. Keep your balls with you and buy. By then, all that is needed is capital and balls, not so much knowledge.

When market is not at a bear, then valuation method is important. But the business is of paramount importance. The business makes the numbers, not the other way round. People make the business.

So, when I look at a business. I only ask the following.

Is balance sheet strong?

What is the yield?

How sustainable is the yield?

What is the foreseeable growth? ( growth can compensate yield, SPH need higher yield as growth is missing as compared to SSC)

Can I average down with balls intact when correction happens?

These are the broad questions. To answer these questions, you need numbers but also qualitative analysis which is equally important, such as customers analysis, competitors analysis.

After looking at this, I ask myself, what is the bad case scenario yield? Worst case means bankrupt. Look long term.

E.g. Lee metals. Iron ores and steel

Price is falling off the cliff, next quarter of it is still making profits, ( which I strongly believed it will, although margins might suffer) mean it should do ok in a competitive commodity environment, at least until 2020 with the boom of construction In singapore. Assume 1.5-2 cents dividends, yield is very decent. Multiple it by 5 years. What is the MoS for capital loss? And that price if dividend is maintain, what yield are one looking at?

U might think then one might be better off buying bonds which guaranteed 3-4% and long term CARG of 30-40% in a decade.

In equities, I plan to not loss money, and hopefully in the process, pick up some bonus.

My way might not beat the bonds or index investing. But I am comfortable with it, and I find company prospecting interesting and intellect stimulating. By analysis on company also go thro LDMR and in particularly the number part. The qualitative part is what intrigue me now.

For example, when I am reading Keppel, MTQ, SCI, Sembmarine, i go straight to the business analysis and review than mugging the numbers. What is their strategy? What are their new products, what are their views?

The new CEO of Keppel is less forthcoming than MTQ in details is how I feel when I read their AR.

In short, look beyond numbers. Numbers are more misleading than reading a story with numbers. Numbers do not make a story, words do.

Thursday, December 18, 2014

We always have this worry, that worry. She worry about the care giving, managing her work, baby, and her family time. I worry hell lot about the finance resources or strain it will put on me.

However, this year, the conversation get more frequent and detailed, and I finally get the feeling that she is now really more prepared mentally and emotionally.

I have to secretly admits I am rather half- hearted in this pursuit of a second child. I know it will set me back in what I hope to acheive.

Whe she starts telling me her period of "fertility", I know she is really dead serious. So I decide that I really need to get serious too.

I have been half hearted in keeping a healthy diet, especially in this year end holiday. In order not to "short-change" my second child in anyway, I decided to watch my mouth again (what I eat). I also remember when we were trying for the first, we bought quite expensive tonic in the thousands to boast our health and chances. I told her I will go get it again. She said :" maybe just try first" I said our first child is really healthy except inheriting my sensitivitive airway and nose. It might be a coincidence but I do not want to shortchange my future child.

I mange to find the old prescription of tonics. I went to another more reputable TCM shop and realised in the 5 years, inflation applied to TCM too. LOL

Anyway, the bill is significantly higher than what I expect. I hesitated. The sale person told me I can consider other cheaper options, but I am not sure if the effect will be the same?

I walk around the mall in another round and decided that my future child is worth it.

It now dawned on me having money to pay for all these, is a blessing.

Screw the 30 years plan. Live the day as it it Ba. I am happy thou, I went through the state of flux. At least now, I have my wife aware of my status, she ask to go to the food court during our precious 2 alone time. I myself has also better curb the temptation for indulgences.

And if after all these positive exercise, there is no progress, so be it. My family is worth it. Remind me of the romance of three kingdoms game from Koei. I always play the underdog at the worst screnario using the highest difficulty. I enjoy winning and losing and fighting back to win. When I am assured of winning, I stopped playing. I am living my life like a game, what to ask for

Monday, December 15, 2014

I am not sure why Mr Market is giving it a double thumb down, except that it might be feeling depressed.

It went to as low as 30.5 cents. I accumulated in 34 cents, and will be willing to accumulate further at 30 cents, plus minus a few bids.

The latest considerations shares is nothing new, except that the price will be at a minimum of 38 cents. Thus, the maximum of shares to be issue and hence dilution and can be assured.

When I did my sums in my previous post, I already
1) take into consideration the dilution of both consideration shares and placement shares and both at the price of 34 cents
2) Take into consideration Pluit village is going to be around 80% occupied instead.

What are the possible risks then, to distribution?

1) Further weaknesses in operation and occupancy in the rest of the malls

2) Sharp increase in interest rate since they have debts due for financing in the next three years.

It is up to one to decide if indeed 1) and 2) is killing LMIR. Operation numbers in IDR terms has indeed been weak in recent quarters as compared to a year ago. And if the most recent advance distribution is any guide, it is getting weaker. But I am using the weak operating numbers in my calculation.

I look at the Kemang village development:

The residential developments are almost fully sold. Of course, fully sold does not mean fully occupied, but unsold means unoccupied, which is worse. There are another 2 phases of developments in the area.

I also further give a 10% discount to the expected NPI Kemang mall should generate from the pro forma

I believed, I have already heavily discount operation weakness, and found the high 7% yield to be decent and reasonable.

The further weakness could mean 8% yield is now in sight.

Of course, what I am doing is just looking at the knowns knowns, there could be unknowns unknowns.

Sunday, December 14, 2014

Random thoughts series has nothing to do with fiance, it is more like my open diary.

2014 is coming to an end, I have 3 more weeks to go before 2015, but I am in the mood to take stock.

My career
The high point is the move to a new workplace, playing a new role. Although transition has not been easy and learning curve steeper than I expected, I eased into the new environment without major hiccups.

The core business is unchanged, and still passionate about my job. What more can I ask for. My career is definitely my hit and my high point in 2014.

The only area for improvement could well be I should really stop comparing my new workplace with my previous. My previous work is "glamorous" to a certain extent, and I think I need to stop living in the past. It means a lot to me when my colleagues say that they missed me, and actually arrange a farewell lunch, and personal meet up sessions before I go. Some walked up to me and ask why am I leaving, and my presence will be missed. Too much feeding into ego, and I have not snap out of it.

Family
I always make it a point that I do not bring work home. I am always home for dinner, and I believed I put my family in the priority in after work hours.

I think I still have a fiery temper, but I think there are a number of occasions where I controlled it better. I think I experienced what damages a flare up can do to try to be funny again.

I think it is always on my mind to be a good husband and father, but I am not sure of the how, and if I am doing it right.

Friends
I do not have many friends that I meet up regularly. My colleagues are not my friends, although I am close to several of them. I just meet up with my usual "gang" for a drink and supper. I think as we grow older, we are more protective, we do not like to talk about our aspirations or problems like when we were younger. I actually think I blog more about more true feelings and thoughts than what I have said with them in the whole of 2014. When I send one of them home, we have more time in my car to chat, there are a few occasions I feel like telling him how I felt about my life, just like how I blog, but I just stopped. That protection gear is mutual.

We usually end up "suan-ing" the most successful of the group. Oh well, the part that gathers the most suan is not his money, he has no lack of them, but rather his ability with women, LOL.

It is only when one "over-spilled" with problems, do we hurdle together and laments about our life, give honest thoughts on matters etc. Otherwise, it is just "wind flower snow moon"

Myself
"Me time" is always in greater abundance at the end of the year. Me time is really important to me. I talk to myself a lot (blogging is a lesser form of me-time). When I work, I always find pockets of me time too.

Spiritually, I think I am screwed, no need to go into details here.

Physically, I am out of shape, living more unhealthy, especially towards the end of the year.

Money
The high point really is I started to consciously save money whenever possible, I brought breakfast to work, and go for simpler family dine out whenever possible.

However, I seriously think the low point is I am really too obsessed with money. I think I should really chill a bit. You know what, I seriously believe money can buy "some happiness". Money cannot perform miracles, but some happiness, yes I do think it can do some of the tricks. If money cannot buy "happiness", through buying of "time", why do you aim for financial freedom? You are kidding yourself right?

Money makes me compare with others. No, I do not feel angry or hate others, I seriously don't. I just feel inferior. I feel inferior, not because I has less, I am fine with that too, really. I feel horrible, because I am making little or no progress.

The high point in money matters, is really having the heart to heart "whatsapps" with my wife about finances. I told her given that almost all the household expenses fall on me, I really do not have much disposal income and I couldn't really save monthly. I work out all the expenses, and told her that although I am earning much more than her, her disposal income is actually several times higher than mine. I think she finally gets it. She is not a bad woman, never one to start with, it is my ego that stopped me from letting her know. Of course, I do not think she is ready to share the burden, LOL

The low point is really when I have to sell a winning counter to pay for a expensive overseas trip. Yeah. I know. Although the year-end bonus is more than enough to pay for the trip, it did create "cash flow problems", given that I have an iron bowl job, I do not really keep a big emergency fund. That is basic finance 101, I know. I didn't have it. An irony of a finance blogger.

There is plenty of talk about chasing the dollar, how mindless it is. With all respect, it is mindless only after you have "enough", although everyone define "enough" differently, those who had enough can never understand how it feels to have "not enough". I do not have enough. I am working hard to have "enough", and I seriously do not think I am greedy or set too high a bar.

We can all talk about the wisdom of balancing the life and not allow law of diminishing returns to set in for the pursuit of money. Those are all rich men talk. Most finance bloggers I felt, are rich people. "You" (if you are reading this, chances are you are into investing, whether you own a blog or not) are really nice people, simple and sincere. But "you" are rich in my definition, and they reached the stage of being rich through hard work and perhaps some luck. The light will never see darkness.

The insecurity and the loud "what if I am single..."voice in my heart, is feel I a result of obsession with money. Although it is always very quickly drowned by the choruses of "a happy son, pretty wife and a luxury life (a car), for example, and words of contentment, rich people have their problems, I would still lead my life the same even if I strike toto", etc... The fact is ... I am unhappy about my situation, and I do not know what more can be done. I told myself that I should stop comparing myself with investors but maybe with simpler people. Too bad, the fact that I have built up knowledge of it for a decade, however inadequate, means I should be making full use of that knowledge to meaningful actions with significant consequences.

Looking back at 2014, the longest paragraphs is reserved for money. Obsession! On well, if you are expecting a portfolio review when I talk about money, I am sorry to disappoint me. Although I have more misses than hits this year, and returns is mildly negative perhaps? (didn't really count), I am still comfortable with my get dividends and buy more when price drop strategy.

Seriously, keeping a diary perhaps is better than blogging? I sure sound like I am pandering to get sympathy here. Should I actually publish this? LOL.
Maybe I should ... The blogger-sphere has enough success stories, time for diversity. LOL

Friday, December 12, 2014

I have heard of these grouses too many times, and is guilty of some of these. But are these really the issue, are there ways to look beyond these?

1) Fund raising

It diluted the shareholders' interest.

Me: How else would you like to do it, there is 35-60% limit and soon to be universal 45% Loan limit.

2) Shares placement

Damn, why don't they do a rights exercise instead?

Me: Placement exercise is faster, and does not required the big owner to cough out cash. I used to prefer rights, now, if the fund raising exercise is less than 10% dilutive and is used in yield accretive exercises, I prefer placements.

3) DIscount in rights or shares placement.

WT... Why is the discount so excessive?

Me: if there is no discount, it is difficult to get big players. Usually, if the discount is 1-3% plus the dilution effect, it is considered not too bad. If it is more than that, it reflected the weakness of the reit. LMIR and Sabana are weak in this respect compared to Ascendas Reit.

Also, AIMS rights discount is rather excessive too, but Mr market see it as a opprtunity rather than Weakness. Again, it is not the discount per se, but the track record of using the money for yield accretive accquisition.

4) Payment of fees in the form

Of units.

This leads to further dilution.

Me: But if payment is done in the form of cash, there is less cash for distribution at the end of the day anyway. However, I do not take kindly to management who received the units at discount at sell it off almost immediately.

5) Management fees or performances fees pegged to AUM and not DPU.

The management just do dump and recycle and earn management fees at the expense of shareholders!

Me: There are indeed management who do that. But it's the track records of management that matters, not the pegging to DPU or AUM per se. Some

Management pegged perfoRmance fees to DPU growth, but never deliver. Instead they keep buying and buying to earn acquistion fees and earn higher base fees. To me, there is a BIG BIG difference in buying a 92% occupied mall at 10% dilution cost and buying a 50% factory at 10% dilution cost!!

If u see management that do that, run! But do note that management changes. Vested and biased, but LMIr past acquisitions are yield destroying, they did highly dilutive rights when gearing is low to buy mall. Straight in your face dumping in action. Alvin, the new CEO, reduce dilution by raising less money to buy a 92% occupied mall (that is new), and stretch cash and gearing. It's shows hell of a difference in management style. Who is Alvin? The ex-manager of PST, the only shipping trust that is privatized and is giving a yield of close to 9% to me. Too bad...

Keppel reit managers are accused of that too, but when the yield improve, everyone keep quiet again.

6) Dividends reinvestment plan.

Me: This is something new, have not heard any grouses about it yet. You can use your dividends to buy back units at discounted price.

Again, it depends on the discount. But my gut feel and infoRmal tracking seem to suggest reits with dividends reinvestment plan seem to do worse than those without.

But, if u ask me. If The big boss take units as dividends when it is trading above NAV, and the boss holds it, it is not that bad a deal.

7) Weak parent or sponsor, or small stake of sponsor

If it is so good, why didn't the sponsor hold more of it?

Me: this is one grouse I considered valid. Also, there are few real tangibles for a strong sponsor.

1) pipeline of acquisitions

2) big sponsor and reit with big AUM usually has lower interest costs

3) possibility of bailout by parent when shits happen. ( don't worry, as retail investor, you are screw when that happens, read conclusion)

8) lousy management

Anything that goes wrong, blame management.

Me: I gauge management in 3 areas.

1) portfolio management, ability to keep properties at tip top conditions, and occupancy rate high as compared to industry norm and achieving positive rental revision when rent is lower than spot rate.

Management for lower revenue due to currency exchange weakness. Blame them on wrong hedging would be more justifiable.

Blame them on timing of fund raising. As no one can predict the performance of share price in the short term, that a share price under perform and fund raising go ahead is a tad too demanding.

Conclusion:

REITs as a asset class, has its inherent flaws and risks. Understand it so that there will be less grouses for your own health benefits. LOL

Reit as a model, is inherently flawed. In the case of rapid falling property prices due to falling occupancy, reits will be in serious trouble unless their ah gong ( parent) come to the rescue, by then, the rights will be highly dilutive and heavily discounted.

Thursday, December 11, 2014

I read with vested interest in ST ex-employees charged in court for using bribes to get contracts.

I do not want to go into the moral high grounds... So far, what I read was the bribes was given to get contracts, I have not read whether their wallets are fattened directly. I also read the CFC was charged with falsify entertainment accounts.

I SPECULATE only here, that the bribes were dump at the "entertainment expenses" during auditing.

I do not work in the business work, this is just my naive thoughts, maybe battle hardened readers can answer?

I know entertainment is part and parcel of doing business in Asia. From my conversations with friends and relatives,I know the west, ( Germany, specific is the country my relative talk about), might not put so much emphasises in entertaining cilents to get a contract.

I have heard also how "elaborated" entertainment can get, wine, women, etc. If entertainment expenses is legal, in the sense that it can be claim under tax rebates, how do one draw the line between corruption?

The amount involved?

When in Rome, do as the Romans do.

It does not apply when corruption is concerned? How to win that contract.

Call me inmoral, but I am not sure if there is double standard here, but if it is just "do whatever, just don't get caught". Good luck if you are caught.

While I appreciate the lower dilution and the utilisation of cash from the 2013 placement, there are also more questions that need to be answered.

About 100 mio is raised in the last placement, more than enough to cover the 70 mio difference the initial placement exercise want to raise.

So altogether, 170 mio of cash(excluding the 40 mio and consideration units to be issued) need to be set aside for this acquisition. Looking the Q3 cash level of 223 mio. it seems that the lower dilution is a pleasant surprise.

However, the pleasant surprise is offset by a nasty surprise of only 0.55 cents of advance payment. while it is not confirmed, lets assume the full quarter of distribution is 14% higher (13 days more out of 90), which is 0.62 cents. It is still an almost 10% fall in DPU QoQ from 0.69 cents.

The Pluit Village effect coming into play?

Looking at the currency exchange for the past 6 months, hardly any big swing to answer for that lower distribution

I almost wanted to accumulate at the lower price, until the lower distribution caught my eye.

A quick calculation:

Total dilution from equity raising and consideration shares will be about 10%.

So, 0.55 cents could be a conservative new normal QoQ DPU going forward for the next 1-2 quarters with all the one-off costs causing more downward pressure.

Assume 15 mio increase in NPI for distribution, yearly DPU should 2.75 cents, which translate into a yield of 7.9 % annually.

Monday, December 1, 2014

If you invested in any O&G company in post GFC. You are most probably staring at losses. If you bought more than 1 year ago, it should be "ouch"

In fact, it is during these moments of loss, that it provide a very opportune moment to stare at yourself at the mirror and ask if your mind is really in coherence with your method.

I am vested with SCI with paper losses too.

I have always worried about marine being a drag, but I thought I have gotten it cheap at 4.6.

How do I feel?

Nothing. And call me shameless, delusional, I am proud of it.

It took me almost a decade for this mental state. Everyday, I read about oil prices collapsing, to a low of even $40. I do not agree with that, because way before that, shale and several OPEC countries will be fighting for their life. When people fight for their life, creative solutions abound. How about$50, I don't know, and I am not really interested.

These are the reasons for me buying SCI, and if you regret it now. You mind is at loggerhead with your method, and u will get into trouble sooner or later.

1) I do not know the bottom. I know SCI will continue to pay dividends althought they might reduce it.

2) Assume Marine earning half, and utilities remain status quo for the next few years, dividends should still flow if they increase payout, even if they keep to the current payout. 10 cents a year of panadol, is not too bad.

3) The longer the drought, the stronger the rebound thereafter. How about a drought of 5-10 years. That is pretty scary, but hey, if you say you are a long term investor who will pick up a bargain, u now know if u mean what you say. Or are u having second thoughts now? Are you thinking how come no stop loss? Why not sell now buy later. Nothing wrong with stop loss or buy now sell later, at long as they are your plans at the initial stage when you click the buy button. To say things have changed, and I am selling now, my plan do not work, could means seriously that u have to change first for your plan to work.

4) I will most probably have chance to buy ST and SCI soon. If it falls not too badly, the dividends will heal itself, if it falls badly, the yield and entry gets better.

5) so, am I betting on a recovery soon? You must be kidding? The upcycle just ended. Even if oil goes back to $80

And above, the rigs orders will not come fast and furious.

6) there are better alternatives. This is my weaker link. But do understand good news and valuation are usually negatively correlated.